Bring the Prophet to the Mountain

Bring the Prophet to the Mountain

How to convince corporate customers of the benefits SEPA holds for them

26 October 10

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Banks successfully implemented services

The realisation of the Single Euro Payments Area ( ) as envisioned by policy-makers including governments, the European Commission, the ECOFIN and the Governing Council of the European Central Bank, is crucial to the completion of the internal market and the monetary union. The European banking industry cooperating in the European Payments Council ( ) fully supports the vision and has successfully made available the necessary payment schemes and frameworks for credit transfers, direct debits and card payments.

In January 2008, more than 4300 banks in 31 countries representing roughly 95 percent of payment volume in Europe took a historical first step to starting by launching the Credit Transfer Scheme ( ) for euro payments. With the launch of the Credit Transfer, European banks are the first in the world to deploy a new global format - the ISO 20022 XML message standards - for mass euro payment transactions. This innovation is likely to have an impact far beyond Europe, as corporates, banks and central banks in Asia and in the Americas have already started to realise the global implications of 31 countries moving jointly towards this international standard. In January 2008, all banks also started to issue cards that are compliant with the Cards Framework (Chip and PIN). The developed the Core Direct Debit Scheme and the Business to Business Direct Debit Scheme, which create, for the first time, a payment instrument that can be used for both national and cross-border euro collections throughout the area. Currently, many banks are preparing their organisations to launch Direct Debit customer offerings from November 2009 onwards.

The banking industry has demonstrated its ability to deliver services on time as expected by the political drivers of the project. At the same time, the schemes and frameworks are continuously evolving in close dialogue with the representatives of customers and processors to ensure that their needs are being met.

holds many benefits for customers - who, unfortunately, do not appear keen on reaping them

The realisation of is intended to benefit first and foremost the users of payments services: once is achieved, it will be possible to exchange euro payments between any accounts in as easily hemes/advanced/langs/en.js" type="text/javascript"> as it is possible today only within national borders. For businesses, common standards, faster settlement and simplified processing will improve cash flow, reduce costs and facilitate the access to new markets. For consumers, the experience of making and receiving euro payments will remain essentially the same but is now extended to all bank accounts in . Moreover, will create the conditions for enhanced competition in the provision of payments services to the advantage of bank customers. According to a study conducted at the request of the European Commission, the replacement of existing national payment systems by holds a market potential of up to €123 billion in benefits, cumulative over six years and benefiting the users of payments services in particular.

For these benefits to actually materialise, however, early and expedient uptake of the new instruments particularly by those bank customers generating a critical mass of payments volume such as corporates is indispensable. Given the very limited volume of transactions one year after the launch of the Credit Transfer, however, it seems that corporate bank customers need yet to be convinced that the initial investment into the upgrade of their payment applications is actually worth the while. Going forward it will therefore be necessary to implement the measures required to do so.

Spread the word: communication efforts have to be increased

Communication efforts on all levels have to be increased to encourage corporates that re-engineering payment processes based on innovative end-to-end solutions will reduce costs because of standardisation, automation and enhanced banking services. schemes and standards are an integral part of such solutions. The is making available a broad range of communication tools tailored to meet the information needs of different stakeholder groups and encourages all interested parties to make use of these tools as they deem fit (see article "New EPC Publications available" in this newsletter). At the same time, the expects the political drivers of the initiative to invest in communication on a scale comparable to such efforts afforded for the euro introduction.

Provide the tools: banks and service providers deliver custom-tailored solutions

Banks will continue to play a major role in communicating the concept to their customers based on attractive product offerings. Technology providers, e.g. software vendors, processors, system integrators and consulting firms should support the development of new cost efficient products and services that will facilitate rapid and low risk conversion and migration to for customers.

Create critical mass: public administrations have to engage now

will become a reality when a critical mass of transactions has migrated from national euro legacy instruments to the new instruments. This goal can only be achieved if major players in the payments environment such as public administrations become dedicated customers. The public sector is a prime economic actor and is responsible for as much as 50 per cent of the GDP in the euro area and accounts for up to 20 per cent or more of payments made in society. To reach a critical mass of payments, the engagement of all public administrations is indispensable. Moving this volume of payments made by public administrations to instruments would not only significantly contribute to creating critical mass, but would in addition trigger the adoption of instruments by others, such as corporates and consumers. Given the wider benefits for society, public administrations could and should therefore play a major role in kick-starting migration by setting an example for all customers.

At this point and compared with all other sectors, public administrations appear to particularly under-perform as regards implementation (see also the article "Tomorrow is another day" in this newsletter for the latest findings on the subject). The April 2009 issue of the Newsletter will focus on the progress of implementation in the public sector.

Generate incentives: the political initiators should support migration for customers

is a policy-maker-driven European integration initiative to follow up the euro introduction - not a demand-driven process. It is therefore essential that the political initiators of the process create the incentives needed to communicate its objectives and to facilitate the migration to the new instruments for bank customers. The following measures, among others, would support the change-over for users of payments services to :

European Commission
  • Secure the continued commitment of governments to the realisation of
  • Create the appropriate regulatory and legal environment for the instruments to be implemented
  • Provide the necessary communication support on a scale comparable to the introduction of the euro
National governments and Central Banks
  • Demonstrate leadership in the national Committees together with all other stakeholders as was done for the euro introduction
  • Ensure consistent transposition of the Payment Services Directive (PSD) as of 1 November 2009
  • Encourage and support implementation by public administrations at national, regional and local level. The buy-in of public administrations is of vital importance as the public sector generates more than 20 per cent of payment traffic in the
  • Collectively agree end-dates for migration of public administrations to payment instruments
  • Allocate the resources for implementation and migration in annual budgets now
  • Require the use of standards in public procurements for payments services allowing banks to deliver payments services to any public administration in the area
  • Design and implement incentives which will facilitate the change-over from legacy payment instruments to for the business community - such as granting tax breaks for SMEs, for example
  • Facilitate, if necessary, the continued use of existing direct debit mandates under the Direct Debit Scheme
European Central Bank
  • For the change over to the euro a substantial communication budget was made available; a comparable communication effort should be afforded for implementation by the European Central Bank acting as a principle catalyst of the process
  • Differing balance of payments reporting requirements as established by various National Central Banks pose legal barriers to the concept of one domestic euro payments market and must be removed - immediately

At this point, the success of depends - above all - on the continued commitment of and practical support by the political drivers of this project.

Set an end date: should there be a timeline for phasing out euro legacy payment instruments?

In discussing means to encourage market uptake some - including the European Commission and the European Central Bank - advocate setting a date after which services for making euro payments based on national payment schemes would no longer be available to customers. The is currently in the process of evaluating related proposals and the implications thereof. It is expected that will communicate its conclusions on the subject in 2009.

Be involved: customers are called to action

In a very first step, the establishment of a dedicated team by corporates and public administrations as was done for the euro introduction will enable customers to identify the benefits as well as the costs associated with implementation and to assess the impact on internal systems. Clarity on these issues will in turn facilitate the procurement of the most suitable solutions offered by banks and technology providers. Eventually, these steps should result in the design of specific implementation projects by individual business.

The also encourages customers to actively take part in the evolution of schemes and standards. Stakeholders may choose to liaise with Stakeholders Forums established by the banking communities on national level. Any organisation acting on European level to represent the interests of specific user communities is invited to join the Customer Stakeholders Forum. Last but not least, users have the opportunity to take part in any public consultation carried out by (for information on ongoing consultations please visit

Get started - now.


Gerard Hartsink is the Chair of the .

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